Term Life Insurance Guide for Agents: Lengths, ROP, Conversion and Riders

Oct 20

Term life insurance covers a set period, such as 10, 20 or 30 years, usually for a level premium. If the insured dies during the term, the beneficiaries receive the death benefit, which is generally received free of federal income tax. If the term ends and the policy is not renewed or converted, coverage stops. Most term has no cash value, which is why it costs far less than permanent coverage for the same face amount. This guide covers what independent agents need to know to sell term life well: term lengths, who each one fits, return of premium, conversion, riders, mortgage protection and which carriers to quote.

Key takeaways

Match the term to the need. The mortgage, the kids' ages and the years until retirement usually pick the term length.
Quote more than one carrier. Underwriting and pricing vary widely by age, health and face amount.
Always check conversion. A convertible term policy lets the client move to permanent coverage later, usually without new medical underwriting.
Mortgage protection is term life. It is the same product, sized and timed to the mortgage.

How term life insurance works

The client chooses a face amount and a term. The premium is set at issue based on age, health, tobacco use and the amount of coverage, and on a level term policy it stays the same for the whole term. Most term policies can be renewed after the level period, usually at a much higher yearly premium, and many can be converted to permanent coverage within a set window.

Term lengths and who each one fits

Common level terms are 10, 15, 20, 25 and 30 years. Available lengths depend on the carrier, the product and the client's age, and some carriers offer other durations.

10-year term: short-term obligations such as a business loan or key person coverage, clients near retirement who need coverage until pensions or Social Security start, and parents whose children are almost on their own.
15-year term: families with school-age children and homeowners with a 15-year mortgage.
20-year term: one of the most popular choices, covering the years of raising children, building savings and paying down a mortgage.
25-year term: coverage beyond 20 years without a full 30-year policy, such as a 25-year mortgage or a buy-sell agreement.
30-year term: young families, new parents and homeowners with a 30-year mortgage who want to lock in a level premium for as long as possible.

Return of premium (ROP) term

Return of premium term works like level term, but if the insured outlives the term and the policy stays in force, the carrier refunds the base premiums paid. The trade-off is a noticeably higher premium. ROP fits clients who want coverage but dislike the idea of paying for a policy they may never use, and who can afford the higher cost. Not every carrier offers ROP, and the refund rules vary by product and state.

Conversion: the feature clients forget to ask about

Many term policies include a conversion privilege that lets the policy owner exchange some or all of the term coverage for a permanent policy, such as whole life or universal life, usually without new evidence of insurability. The conversion window and the products available to convert into are set by each policy. For a client whose health may change, conversion can be one of the most valuable features on the policy, so always check it before you recommend a product.

Underwriting: exam, no exam and simplified issue

Depending on the carrier, the client's age and the face amount, a term application may be approved through accelerated underwriting with no exam, or the carrier may order a paramedical exam and lab work. Carriers check the Medical Information Bureau (MIB), prescription history and driving records. Simplified issue term asks health questions instead of requiring an exam, usually at a higher price and with lower maximum face amounts. Set expectations up front so the client is not surprised by an exam request.

Riders worth knowing

Accelerated death benefit (living benefits): many term policies let the insured access part of the death benefit early after a qualifying terminal, chronic or critical illness.
Waiver of premium: premiums are waived if the insured becomes totally disabled as defined in the rider.
Child term rider: a small amount of term coverage on the insured's children.
Accidental death benefit: an additional benefit if death is caused by an accident.

Rider names, costs and definitions vary by carrier and state, so quote from the carrier's current materials.

Mortgage protection is term life

Mortgage protection is term life insurance positioned around one need: keeping the family in the home if the insured dies during the term. It is usually written as level term matched to the years left on the mortgage, with the death benefit paid to the family, not the lender. For a full call framework, see our mortgage protection sales script.

Who buys term life insurance?

Young families: protecting a spouse and children from losing an income.
Homeowners: covering the mortgage if something happens to the earner.
Business owners: key person coverage and funding buy-sell agreements. When a business owns a policy on an employee, the employee must get notice and give written consent before issue under IRC 101(j), or part of the death benefit can become taxable. Transfers of existing policies between owners can also run into transfer-for-value rules.
Anyone with dependents: parents, guardians and anyone who supports someone financially.
Families of final expense clients: younger family members are often a natural term conversation.

Which carriers in our lineup offer term life?

Among our 13 carriers, Transamerica, AIG / Corebridge, American Amicable, Foresters, Royal Neighbors and Mutual of Omaha offer term life through independent agents. Ethos, Americo and many more are on the way. Product availability varies by state, and the products on your contract are confirmed when you contract. See each carrier's profile on the Carrier List and how term compares with IUL, UL and whole life on our Life Products page.

Contracting for term life with BetterLifeQuotes.com

BetterLifeQuotes.com is an NGA / IMO Hybrid & Distribution Partner that will beat your current commission levels and scale your current practice. Our job is to beat your current commission level, and our mission is to make sure you scale with every life insurance product: final expense, term, IUL, UL and whole life.

Solo agents starting out who meet our 6-month minimum requirement start at a 90% commission at contracting.
Back office support (a guided contracting roadmap, a members portal, a carrier resource directory and help with carrier appointments, transfers and contracting questions; sales training, telesales scripts, objection handling, closing strategies, personal coaching and ongoing professional development; an agent management system with production, commission and book-of-business reporting; the CallWave inbound call platform with lead strategy and ROI guidance; and recruiting, training and retention resources for agency growth) comes with every product we contract.
You own your book of business, your renewals and your hierarchy, even upon release, and releases are granted.

Apply as a solo agent, or see contracting for new agencies, established agencies and healthcare agencies.

Term life FAQ for agents

What is the difference between level term and decreasing term?

On level term, the death benefit and the premium stay the same for the whole term. On decreasing term, the death benefit gets smaller over time, often to track a loan balance. Most term life sold today, including most mortgage protection, is level term.

What happens when a term policy ends?

Coverage stops unless the policy is renewed or converted. Many policies can be renewed year by year at a much higher premium, and many can be converted to permanent coverage within the conversion window without new medical underwriting.

Is the term life death benefit taxable?

Life insurance death benefits are generally received free of federal income tax by the beneficiaries. Estate tax and other situations can differ, so clients with complex estates should talk with a tax professional.

Can a term policy be converted to whole life or universal life?

Many can. The policy's conversion privilege sets the deadline and the permanent products available. Check the conversion terms before you recommend a term product.

Who gets the 90% starting commission at BetterLifeQuotes.com?

Solo agents starting out who meet our 6-month minimum requirement (at least 6 months of continuous life insurance sales, plus the rest of our minimum requirements) start at a 90% commission at contracting. For agencies, our job is to beat your current commission level.

This guide is for licensed agents and is not tax or legal advice. Product features, riders and availability vary by carrier and state.

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